Ref. Peel Land and Property (Ports No 3) v TS Sheerness Steel Limited [14 June 2013]
In an interesting case from the High Court, Mr Justice Morgan has presided over an issue of entitlement of the removal of large sections of plant which have been installed into the demised premises as part of a term of the original lease. He was required to decide whether the tenant could remove these items, which it wished to do so at great personal expense. To complicate the matter, 126 items were highlighted and disputed and each required individual assessment.
The lease in question was for 125 years and was granted for the erection of the Sheerness steel works in Kent. The tenant was liable to build and equip the steelworks so it was capable of producing at least 50,000 tons of steel products each year and it did so. Naturally, the plant is very substantial, comprising furnaces, numerous cranes, water coolers, fume treatment machines, transformers and other substantial items of machinery.
In 2012 the Steelworks ceased trading, the business was sold and the lease was assigned to the current tenant. The issue then arose as to whether the tenant could remove and sell the equipment.
The matter of law in question is a tenant’s inalienable right to remove from property chattels and so called ‘tenant’s fixtures’. They are not, however, allowed to remove landlord’s fixtures which are a part of the land and therefore in the ultimate ownership of the freeholder. Establishing in which category a specific item lies is difficult and is a matter of applying various tests originating from cases brought over several centuries. As Mr Justice Morgan commented, rather few of these cases were in the 20th and 21st centuries and no litigation has before been required to address the potential removal of such substantial items.
Although it is undisputed that the plant and equipment were once chattels, when they became a part of the fabric and structure of the buildings did they become fixtures? If so, were they the landlord’s or tenant’s fixtures?
In the absence of strong precedent, the Judge had to take account of a wide range of previous litigation, the exact wording of the lease and the intention of the parties on signing the original lease, back in 1971. The Judge and the two Parties’ legal representatives were happy to take guidance from the legal textbooks – in particular Woodfall on Landlord and Tenant, Looseleaf Edition – which helpfully amalgamated the various cases.
To answer this question, the Judge examined the physical extent of each item to determine that it was installed for the tenant’s trade and could be removed without substantial difficulty and without serious damage to the item or the premises.
If an item could be satisfactorily removed, could be considered a tenant’s fixture.
If removing it would cause lasting damage to the property or the property’s equipment, like the removal of one particular furnace, it should be considered the landlord’s fixture.
On examining the lease document, the Judge did not think the terms affected the position. The common law permits removal of tenant’s fixtures even if installed pursuant to an obligation under the Lease and clear words to the contrary would be needed if a tenant was not to be able to remove its fixtures and fittings. The Judge did not think it was the commercial intention that the tenant was to fully equip the building for the benefit of the landlord as if the premises had been originally let on that basis.
The vast majority of the 126 items in question were therefore allowed to be removed and sold by the tenant. This provides a new precedent in other cases that concern such large and expensive equipment and should therefore be noted by those operating in the commercial market.
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If your lease is running out of years or you require a Schedule of Condition (at the start of a lease) or Dilapidations (at the end of a lease) you will need the services of a qualified Chartered Surveyor. You can contact your local professional on the link below:
SRJ / LCBÂ Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 23/08/2013
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